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Capital Budgeting5

Capital Budgeting5 - 1 2 3 4 5 \$300 \$400 \$450 \$300 \$200 At...

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Old Exam Questions - Capital Budgeting Page 29 of 55 Pages 1 \$300 2 \$400 3 \$450 4 \$300 5 \$200 At the project’s WACC of 12 percent, the project has an NPV of \$346.18. Given this information, determine the project’s internal rate of return. A. 25.17% B. 26.92% C. 24.23% D. 27.88% E. 26.01% 42. A company is considering a project with the following cash flows: Project Year Cash Flow 0 -\$200,000 1 \$125,000 2 \$100,000 3 \$75,000 4 -\$25,000 The project’s weighted average cost of capital is estimated to be 10 percent. Given this information, determine the project’s modified internal rate of return (MIRR). A. 14.65% B. 14.25% C. 14.05% D. 14.85% E. 14.45% YOU ARE GIVEN THE FOLLOWING INFORMATION FOR PROBLEMS 43 - 44: Year Project A Cash Flow Project B Cash Flow 0 - \$10,000.00 - \$11,000.00 1 \$ 3,000.00 \$ 5,000.00 2 \$ 4,000.00 \$ 4,000.00 3 \$ 5,000.00 \$ 4,000.00 4 \$ 3,000.00 \$ 3,000.00

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Old Exam Questions - Capital Budgeting Page 30 of 55 Pages 43. Given this information, and assuming that the relevant cost of capital for both projects is 10%, determine the net present value (NPV) for the project with the highest internal rate of return (IRR). 44. Assume now that the firm has capital rationing, but knows that its true reinvestment rate is 20%, while its cost of capital is 10 percent. Given this information, determine the modified net present value (MNPV) for Project B. YOU ARE GIVEN THE FOLLOWING INFORMATION FOR PROBLEMS 45-47: Year Project A Cash Flow Project B Cash Flow 0 - \$10,000.00 - \$12,000.00 1 \$ 3,000.00 \$ 3,000.00 2 \$ 2,000.00 \$ 4,000.00 3 \$ 5,000.00 \$ 5,000.00 4 \$ 2,000.00 \$ 4,000.00 5 \$ 2,000.00 \$ 1,000.00 Risk-free Rate 6.0% Market Risk Premium 4.0% Project A Beta 1.50 Project B Beta 1.40 45. Given this information, determine the internal; rate of return (IRR) for Project A. 46. Given this information, determine the modified internal rate of return for Project B. A. 12.42% B. 11.68%
Old Exam Questions - Capital Budgeting Page 31 of 55 Pages C. 12.79% D. 11.31% E. 12.05%

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Capital Budgeting5 - 1 2 3 4 5 \$300 \$400 \$450 \$300 \$200 At...

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